Fuel Prices and the Cost of Living

Kerry McCarthy Excerpts

Wednesday 16th March 2011 Commons Chamber

[Kerry McCarthy (Bristol East) (Lab)]

We have heard today from Members on both sides of the Chamber about how ordinary working families and people are feeling the squeeze in these tough economic times.

My hon. Friend the Member for East Lothian (Fiona O’Donnell) made an excellent speech in which she spoke up for the constituents who have contacted her by e-mail telling stories of how they are being hit by the fuel price rises. My hon. Friends the Members for West Dunbartonshire (Gemma Doyle) and for Scunthorpe (Nic Dakin) added their tales of woe from constituents who are finding times difficult. My hon. Friend the Member for Edinburgh South (Ian Murray) mentioned a constituent who wrote to him about being hit from all sides by a litany of blows rained down on him by this Government. My hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) referred to a cocktail of economic policies that amount to an assault on the living standards of ordinary working families.

My hon. Friend the Member for Edinburgh South talked about the impact on small businesses, as did the hon. Member for Rugby (Mark Pawsey), who spoke from first-hand experience as someone who used to run his own business. He said that the cost of fuel had gone up from £2,000 per month to £3,000 per month, which was obviously having a major impact on the ability to run a profitable business.

[Robert Flello]

Is my hon. Friend aware that organisations such as the Road Rescue Recovery Association, the Freight Transport Association, the Road Haulage Association and the Scottish Vehicle Recovery Association are asking, “When are the party in government going to honour their pledge about the stabiliser?” They are desperate for that to happen.

--- Later in debate ---

[Kerry McCarthy]

I will turn in a moment to the pledge about the stabiliser. The hon. Member for Worcester (Mr Walker) called for it to be implemented very soon, as did the hon. Member for Devizes (Claire Perry), who is no longer in her place.

[Tessa Munt]

Does the hon. Lady agree that the Minister will be very generous in seeing representatives of the FairFuelUK campaign, who have 140,000 signatures on their petition as of today? That is organised by Peter Carroll. The chief executives of the Road Haulage Association and the Freight Transport Association and the operations director of the RAC, together with Quentin Willson, the motor journalist, and I, coming from a hard-hit rural constituency, will discuss this tomorrow. We are suffering the double whammy of domestic oil and fuel oil—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. This is supposed to be an intervention, not an opportunity to make another speech or to put out an advert.

[Kerry McCarthy]

I would not expect any less of the Minister, as she certainly should be meeting the organisations. It is a shame that the Chancellor and the Chief Secretary to the Treasury were not also here today to listen to people.

The hon. Member for Brigg and Goole (Andrew Percy) talked about his election leaflets hounding his constituents about the fuel duty stabiliser. He referred to the work that Conservative central office had put into the policy, which he described as a well-thought-out policy from before the election that will be implemented shortly. I may disabuse him of that delusion a bit later in my speech.

The hon. Member for Amber Valley (Nigel Mills) talked about the impact in rural areas and the fact that people could not afford to go to work, and he urged the Chancellor not to go ahead with the fuel duty escalator. My hon. Friend the Member for Stockton North (Alex Cunningham) ventured further afield and discussed the impact of fuel poverty on people who were having to spend more than 10% of their income on heating their homes, saying that what the Government are doing across the board is likely to push more people into fuel poverty. It was a very thoughtful speech.

The hon. Member for Bristol West (Stephen Williams) talked about petrol prices in Bristol. I am sure that one of the few things on which we can agree is that Bristol desperately needs to sort out its transport issues and develop a better public transport system. It has the worst congestion of any city in the country, and we need to address that. The hon. Member for Na h-Eileanan an Iar (Mr MacNeil)—did I pronounce that correctly?

[Mr MacNeil]

Almost.

[Kerry McCarthy]

Almost. The hon. Gentleman talked about the rural fuel derogation, but I do not think that he got an answer from the Economic Secretary. He asked when the pilot in the Outer Hebrides would happen and whether he could have more details.

The hon. Member for East Antrim (Sammy Wilson) went on a bit of a flight of fancy about the Economic Secretary engaging people in head-locks and bare-knuckle fighting, which, I am afraid, she missed. He then expressed disappointment that we had had no softening up from her—I am not sure where he was going with that. However, he also spoke evocatively about the impact of the fuel price rise on his Northern Ireland constituents.

The hon. Member for Dover (Charlie Elphicke) accused the Labour party of shameless opportunism in speaking up for constituents and trying to address the impact on hard-hit motorists. What I would describe as shameless is the Conservative party’s leading people to believe before the election that it could cut 10p off the price of petrol and then doing nothing about it.

[Mr MacNeil]

Will the hon. Lady give way on that point?

[Kerry McCarthy]

I am sorry, but I have no time to allow any more interventions.

We heard today that unemployment has now risen to more than 2.5 million. Another 27,000 people have been added to the dole queue in the past three months. Those who are in work find their income squeezed by the rising cost of living, with inflation surging over 5%, but average wages growing by just 2.3% and many in the public sector facing a cut in real terms. People are struggling to make ends meet.

This month, the Office for National Statistics added iPhone apps and online dating fees to its RPI shopping basket—I am not sure what was in its RIP shopping basket. The ONS believes that essentials such as food and fuel now make up an increasing proportion of the average family spend. Of course, we have heard today that the price of fuel is rising fast. A litre of fuel is now £1.32, which is up 7p from the beginning of the year. That is an extra £80 for the average driver.

We accept that the Government cannot control the price of oil. We understand that the turmoil in the middle east and north Africa is having an impact on global prices. However, the Government are not powerless. They have a choice. They could choose to help working families get through the tough times, or to carry on regardless down their reckless path of cuts, which are too fast and too deep, slashing support for families and putting the recovery at risk.

The Government have made the wrong choice. The Chancellor chose to raise VAT to 20%, which hits low and middle-income families hardest and has pushed up the prices of fuel, energy and food and, as we have heard, has hurt businesses, too.

[George Freeman]

Will the hon. Lady give way on that point?

[Kerry McCarthy]

I am afraid that I do not have time.

Before the election, when a litre of petrol was 12p cheaper than it is now, the Conservative party said that it would consult on the fair fuel stabiliser. It said that it would ensure that families, businesses and the whole British economy were less exposed to volatile oil markets. The Prime Minister said that he would help with the cost of living by trying to give a flatter, more constant rate for filling up the car. The Chancellor said that that would be delivered in the Government’s first Budget. It was not. Conservatives led voters to believe that they could and would act. However, we now face the exact problem that the policy was designed to prevent. Rising oil prices have pushed up fuel prices at the pump beyond £6 a gallon, yet there is no sign of the fair fuel stabiliser. Not only that, but the Government have added nearly 3p to the price of a litre of petrol with their VAT rise this year.

The Government need to come clean about whether they will move ahead with the stabiliser and answer the criticisms of a host of commentators, who said that the idea would never work because rising oil prices do not necessarily lead to higher tax revenues. They include the Office for Budget Responsibility, the new head of which said that its analysis suggested that a fair fuel stabiliser was likely to make the public finances less rather than more stable, and the Institute for Fiscal Studies, which said that the claim that the Treasury receives a windfall gain that it can share with motorists when oil prices rise is incorrect. Even the Secretary of State for Business, Innovation and Skills said before the election that the fair fuel stabiliser would be “unbelievably complicated and unpredictable”.

The Government are no closer to introducing the fuel duty stabiliser now than they were a year ago. Rather than teasing the public and dangling the prospect before them, the Government need to nail their colours to the mast and tell us what they intend to do. Labour believes that the Government should reverse their VAT rise on fuels and reconsider the fuel duty escalator rise, which is due in April. In government, Labour often postponed fuel duty increases when oil prices were rising and families felt the pinch. It was clearly the right thing to do then and we urge the Government to reconsider now.

Obviously, there is a balance to be struck between raising revenue and ensuring that ordinary people who are trying to get on with their lives—earn a living, get the kids to school, get to work on time—are not unfairly penalised. For some, driving is a choice and they can cut down on their journeys when petrol prices increase, but what about those who rely on their cars every day and do not have the option of using public transport because the bus and rail services simply are not there, or those who run small businesses, or the self-employed who need to run vehicles as part of their work?

Ordinary working people did not create the global economic crisis; it began in the financial sector. However, under this Government, it is ordinary working people who are paying the price. The Government are taking away more money from families with children than they are asking for from the banks that caused the problem in the first place. The bank levy is expected to raise £2.5 billion, but the last Budget and the spending review took nearly £5 billion from families with children through cuts to child benefit, child tax credits and other measures. The Government have refused to repeat the bank bonus tax that Labour introduced last year, which raised £3.5 billion and could be expected to raise another £2 billion this year.

We believe that the bank levy, which is expected to raise £800 million more this year than was originally predicted, could be used to pay for a reversal of the VAT rise on fuel. That would be the right thing to do: helping people when times are hard, getting the economy moving again and asking the financial sector to pay its fair share. Asking ordinary people to pay and hitting them where it hurts most is the wrong choice. Government Members can try to pass the buck and blame the EU for their failure to act, but the fact is that they have a choice. They could choose to help ordinary working people in the Budget next week. I urge Members to support the motion.